Global Trends in VAT/GST and Direct Taxes - · PDF file · 2017-04-13D. Measures to...

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Global Trends in VAT/GST and Direct Taxes

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Pfeiffer/Ursprung-Steindl (Eds), Global Trends in VAT/GST and Direct Taxes 1

Recent developments in international VAT/GST tax policy

ScandroglioRecent developments in international VAT/GST tax policy Riccardo Scandroglio

I. Introduction: an international perspective on VAT/GSTII. The EU framework on VAT

A. The new place of supply rulesB. The green paper on the future of VATC. The second invoicing Directive and electronic invoicingD. Measures to tackle fraud schemesE. The proposal for a standard VAT returnF. Taxation of Telecommunication, Broadcasting and Electronic Services

III. OECD international VAT/GST guidelinesA. Events leading up to the implementation of the VAT/GST guidelinesB. Legal force of the VAT/GST guidelines and their core featuresC. Neutrality, services and intangibles: features of the guidelines

IV. Concluding remarks

fb-globaltrends-vat.book Seite 1 Freitag, 17. Juli 2015 10:03 10


Pfeiffer/Ursprung-Steindl (Eds), Global Trends in VAT/GST and Direct Taxes2

I. Introduction: an international perspective on VAT/GST

In the modern era of globalization, local and international consumption of goodsand services has reached unprecedented peaks. Consequently, indirect taxationon consumption1 has become a significant and increasingly relevant source ofrevenue. Local governments and supranational institutions have thus becomemore and more involved in indirect tax policy.

According to official data recently published by the Organisation for EconomicCooperation and Development2, VAT has been implemented in more than 150countries around the world. Thirty-three of the thirty-four OECD member coun-tries have a VAT or GST system. The exception is the United States. Moreover, inthe OECD countries, VAT represents 6.6 % of GDP and 19.5 % of total taxation3.The trend, also, indicates a steady increase since 1965, the starting year of thesample considered by the OECD4.

VAT was introduced in the EU by the First and the Second Directives5, in order toreplace national turnover taxes. Following the policy-making role of the Euro-pean Economic Community in the second half of the last century, other suprana-tional institutions have been involved in the VAT/GST implementation process.On the one side, the OECD has been involved in a constant work on the interna-tional aspects and on the neutrality issues of VAT/GST, while on the other side,the International Monetary Fund6 in the last decades has been advising its mem-bers on how to design and implement VAT systems.

The thesis aims at analyzing the recent developments in international VAT/GSTtax policy from a legal standpoint. Therefore, for the purpose of the thesis, the fo-cus is on the EU and OECD’s policy-making role, since the IMF’s contributionhas covered aspects that are more relevant from a macroeconomics viewpoint.After the introduction, section two of the thesis presents the recent and most im-pactful activities of the EU on VAT. Section three is devoted to the recent work ofOECD in the development of an international standard regarding practices to beadopted by local governments while legislating on VAT. Finally, in section fourthe merits and drawbacks of the EU and OECD activities are highlighted.

1 Either in the form of “Value Added Tax” (VAT) or “Goods and Service Tax” (GST), for reasons ofsimplicity, both will be referred to as “VAT” or “VAT/GST” in this paper.

2 Organisation for Economic Cooperation and Development (OECD hereinafter), Consumption taxtrends, 2014, p. 18.

3 OECD, Consumption tax trends, 2014, pp. 39-40.4 OECD, Consumption tax trends, 2014, pp. 39-40.5 Council Directive 67/227/EEC, pp. 1301-1303, Council Directive 67/228/EEC on the harmonisation

of legislation of Member States concerning turnover taxes – structure and procedures for applicationof the common system of valued added tax, O.J. 71, 14.04.1967, pp. 1303-1312.

6 Hereinafter IMF.


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II. The EU framework on VAT

A. The new place of supply rulesBased on Directive 2008/8/EC7, a new set of rules8 regarding where services aredeemed to be supplied for VAT purposes were introduced into the Directive onthe common system of VAT9. In this regard, for EU VAT purposes, one of themain distinctions which has to be made is between supply of goods and supply ofservices, since they have different place-of-supply rules. Accordingly, Art. 24 ofthe VAT Directive states that a “supply of services shall mean any transactionwhich does not constitute a supply of goods”.

With that having been said, the place-of-supply rules in force before Directive2008/8/EC were based on the old version of Art. 43 of the VAT Directive whichstated that: “the place of supply of services shall be deemed to be the place wherethe supplier has established his business or has a fixed establishment from whichthe service is supplied”.

According to the “new” rules, instead, the first distinction to be drawn is on thecharacterization of the customer. If the transaction takes place between taxablepersons – “Business to Business” or “B2B” transactions – according to Art. 44 ofthe VAT Directive, the place of supply of the service is the place where the cus-tomer has established his business. If, instead, the transaction is between non-tax-able persons – “Business to Consumer” or “B2C” transactions – according to Art.45 of the VAT Directive, the place of supply of the service is the place where thesupplier has established his business.

Moreover, regarding supplies provided towards EU customers, the “VAT Infor-mation Exchange System”, or “VIES”, was recently implemented. In order to betreated as a taxable person, the supplier has to register with VIES, this way givingproof to the customer of its status, so that the application of the B2B place-of-sup-ply rules is possible.

Focussing more specifically on services supplied to taxable persons, the newplace-of-supply rules consist in a broad general rule, under Art. 44 of the VATDirective, and a detailed set of specific provisions, waiving the general rule. Inother words, the general rule applies only if the service is not covered by one ofthe specific exceptions, giving sometimes rise to interpretation issues when, forexample, the service consists in many different ones to which different specific

7 Council Directive 2008/8/EC of 12 February 2008 amending Directive 2006/112/EC as regards theplace of supply of services, O.J. L. 44, 20.02.2008, pp. 11-22.

8 Applicable from 1 January 2010.9 Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, O.J.

L. 347, 11.12.2006, pp. 1-118, VAT Directive hereinafter.




provisions are applicable10. In this regard, the European Court of Justice11 in itsconsistent case law12 considers a supply to be a “single” one when one or more el-ements have to be considered as the principal supply, and one or more additionalelements are regarded as ancillary, also being treated like the main supply.

For the specific provisions which waive the general rule, the main ones can besummarized as follows:

according to Art. 47 of the VAT Directive, the place of supply of services con-nected with immovable property, including, for example, the services of ex-perts and estate agents, the provision of accommodation in the hotel sector,the granting of rights to use immovable property and services for the prepara-tion and coordination of construction work, is the place where the immovableproperty is located.

according to Art. 53 of the VAT Directive, “the place of supply of services inrespect of admission to cultural, artistic, sporting, scientific, educational, en-tertainment or similar events, such as fairs and exhibitions, and of ancillaryservices related to the admission, supplied to a taxable person, shall be theplace where those events actually take place”.

according to Art. 56 of the VAT Directive, “the place of short-term hiring of ameans of transport shall be the place where the means of transport is actuallyput at the disposal of the customer”.

B. The green paper on the future of VATOn 1 December 2010, the EU Commission adopted a communication, in the formof an open debate13 called “The green paper on the future of VAT”. In the yearsleading up to this communication the EU Commission had become more and moreaware that the VAT system needed to be enhanced, simplified and modernized14.

10 Ine Lejeune/Silvia Kotanidis/Sofie Van Doninck, ‘The new EU place-of-supply rules from a businessperspective’, International VAT monitor (2009), p. 100 (pp. 102-103).

11 Hereinafter ECJ.12 See, inter alia, ECJ, 25 January 2001, C-429/97, Commission of the European Communities v. French

Republic [1997], ECR I-00637, paragraphs 46-50; ECJ, 2 May 1996, C-231/94, Faaborg Gelting LinienA/S v. Finanzamt Flensburg, ECR I-2395, paragraphs 13-14.

13 European Commission, GREEN PAPER on the Future of VAT: towards a simpler, more robust andefficient VAT system tailored to the single market, COM(2010)695, 1 December 2010 (hereinafterGreen Paper), followed by European Commission, Communication from the Commission to the Eu-ropean Parliament, the Council and the European Economic and Social Committee on the future ofVAT, Towards a simpler, more robust and efficient VAT system tailored to the single market,COM(2011)851, 6 December 2011, that basically encompassed thousands of contributions from thestakeholders in relation to COM(2010)/695.

14 The Green Paper aimed at tackling many drawbacks, such as the lasting differences in national legis-lations on issues like deductions, rates and administrative procedures to which taxpayers were sub-jected. Other highlighted drawbacks were related to the use of technology in VAT administration,collection and fraud tackling.


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With these goals in mind, the Green Paper was seen as an occasion to shift publicopinion’s focus to VAT matters: “After some 40 years, the time has come to havea critical look at the VAT system with a view to strengthening its coherence withthe single market, its capacity as a revenue raiser by improving its economic effi-ciency and robustness, and its contribution to other policies whilst reducing thecost of compliance and of collection”15.

In the Green Paper16, the EU Commission identified the main factors which indi-cated the urgency of launching such a broad debate on the future of VAT:

the complexity of the system, which resulted in huge administrative costs aboveall for small and medium-sized enterprises. Particular areas of concern in-cluded obligations, deduction and rates;

the need for improvement of the single market functioning, which could be ob-tained by reducing the differences, from a VAT treatment perspective, whichexisted between domestic and intra-EU transactions;

the need to tackle frauds and maximizing revenue; the changes in technology and economic environment.

Bearing these urgent matters in mind, the main issues to be addressed in thegreen paper were divided in two broad groups:

the principles of taxation of intra-EU transactions; a series of miscellaneous other issues which needed attention irrespective of

any choice made in consequence of the previous point.

In relation to the principles of taxation of intra-EU transactions, the EU Commis-sion has always supported the taxation at origin approach as was stipulated in thefirst VAT legislation by the Member States17. In brief, taxation at origin providesthat both supplies of goods and supplies of services are taxed where the supplierhas established his business, irrespective of whether the customer is a taxable per-son or not. This approach has never been fully implemented because of the resist-ances from Member States, mainly centered on the difficulties in the implementa-tion, such as the need for a close harmonization of VAT rates and the need to es-tablish a clearing system between Member States to collect VAT revenue. Thecurrent VAT system nonetheless is basically a very technical and transitional sys-tem based sometimes on the origin principle and sometimes on the destinationprinciple. In the Green Paper, the EU Commission still maintained its preferencefor the origin principle but at the same time recognized that the difficulties of itsimplementation could be hard to overcome.

Meanwhile, the main problem with a full implementation of the destination prin-ciple is that there must be consistency between the treatment of domestic and in-

15 European Commission, GREEN PAPER, COM(2010)695, p. 3.16 European Commission, GREEN PAPER, COM(2010)695, pp. 4-6.17 European Commission, GREEN PAPER, COM(2010)695, p. 6.




tra-EU transactions. The EU Commission suggested that consistency could beachieved by also taxing B2C intra-EU transactions at the rate and under the rulesof the Member State of destination, opening the way to the implementation of aone-stop-shop mechanism in the Member State of origin in order to deal withVAT liabilities in Member States other than those in which the supplier is estab-lished18.

Moreover, the Green Paper also identified a series of other miscellaneous issueswhich needed to be addressed in order to establish a more solid, simpler and effi-cient VAT system. The main ones are listed as follows:

ensuring the neutrality of the VAT system; reducing the impact of bureaucracy; making the system more robust – i.e. fraud-proof, namely improving the way

VAT is collected; improving the administration of the VAT system, both on a local and on a su-

pranational basis.

The conclusions of the EU Commission were addressed in COM(2011)851, andthe main ones are the following:

the implementation of the origin principle is a task which is no longer politi-cally achievable. So the Commission has made a commitment to channel all ef-forts to find the most efficient ways to implement a full destination principle;

the main taxpayers’ need is simplification. The EU Commission identified dif-ferent practical actions in order to fight the complexity of the system such as theimplementation of a one-stop-shop mechanism in order to cope with the dif-ficulties of companies trading in different Member States, the improvement ofthe VAT governance on a EU level by enhancing public involvement and trans-parency – i.e. the launch of the EU VAT forum in 2012 and the standardizationof VAT obligations, namely the introduction of a common VAT return;

increased efficiency of the VAT system. The EU Commission, as for this issue,identified some actions, such as broadening the taxable base in relation topublic bodies and reviewing the whole system of exemptions from the taxbase, as well as reviewing the whole rates structure. In particular, the aim wasa progressive elimination of the reduced rates which are no longer economi-cally or politically justified or which are related to goods and services whoseconsumption is discouraged by EU policies;

a more robust and fraud-proof VAT system. The EU Commission, in relationto this topic, aimed at tabling a quick reaction mechanism proposal againstfraud, providing Member States with a legal base to take immediate nationalmeasures against the “ultimate” fraudulent practices. At the same time, the fo-

18 European Commission, COM(2011)851, p. 7.


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cus was on supervising that all the measures approved reached definitive im-plementation, establishing a new set of benchmarks in order to measure theperformance of each tax administration in combating fraud and continuingthe research on the hypothetical different mechanisms to improve the wayVAT is collected and monitored (i.e., the “split-payment model19” and the“data warehouse model20”);

the VAT system needs to be tailored to the single market. The current transi-tional VAT arrangements for intra-EU B2B transactions, based on taxation atdestination along with the reverse charge mechanism, have not been wel-comed by the EU Commission as a definitive regime. Nevertheless, the imple-mentation of a full destination-based regime in which the supplier chargesVAT on intra-EU transaction, would have a huge impact: cross-border cashflow would be enormous and taxpayers liable for the payments of the taxwould no longer be established in the Member State where the tax is due. Ac-cording to the EU Commission, at any rate, it is clear that for such a system tobe effective the implementation of a comprehensive one-stop-shop systemwould be of essence, like many other measures to secure the revenues. In rela-tion to this issue, the EU Commission aimed at proceeding with in-depthtechnical work and a broadly-based dialogue with Member States and otherstakeholders, thereby examining the different possible ways to implement thedestination principle.

C. The second invoicing Directive and electronic invoicingAfter a study had been commissioned in 2008 and a public consultation tookplace21, on 28 January 2009 the EU Commission published a proposal for a sec-ond invoicing Directive22. The proposal (at that time) was warmly welcomed bybusinesses because it basically suggested:

removing any difference in the treatment between paper and electronic in-voices;

setting a common deadline for the issuing of invoices; setting a common period for the storage of invoices.

After a long political negotiation, on 13 July 2010, the EU Council reached anagreement on the EU Commission’s proposal and adopted Directive 2010/45/

19 A model in which VAT is collected through a series of payments made to blocked VAT bank ac-counts.

20 A model whereby the taxable person uploads predefined transaction data in an agreed format into asecured VAT data warehouse maintained by the taxable person and accessible to the tax authorities.

21 Price Waterhouse Coopers, a study on the invoicing Directive (2001/115/EC), TAXUD/2007/AO-009, 3 November 2008.

22 European Commission, Proposal for a Council Directive amending Directive 2006/112/EC on thecommon system of value added tax as regards the rules of invoicing, COM(2009)21, 28 January 2009.




EU23. Many radical changes were made in the EU Commission’s proposal duringthe negotiation: the main ones are described below along with the most signifi-cant features of Directive 2010/45/EU.

The definition of electronic invoice is given by the new Art. 217 of the VAT Di-rective, an electronic invoice is defined as “an invoice that contains the informa-tion required in this Directive, and which has been issued and received in anyelectronic form”. The previous version of Art. 217 did not provide a definition ofelectronic invoice but rather defined the transmission of an invoice “by electronicmeans” as “transmission or provision to the addressee of data using electronicequipment for processing (including digital compression) and storage, and em-ploying wire, radio, optical or other electro-magnetic means”.

As for the acceptance of the recipient, the EU Commission in its proposal initiallyhad agreed to abolish the condition that the use of electronic invoice had to besubject to acceptance by the recipient (currently provided by Art. 232 of the VATDirective). Mainly because it is useful for audit purposes24, Member States did notagree to drop the acceptance, so the condition was maintained.

In relation to authenticity, integrity and legibility of invoices the EU Commissionhad initially proposed to amend the requirement that, for electronic invoices, theauthenticity of their origin and the integrity of their content had to be guaranteed.At any rate, that requirement was not only maintained in Directive 2010/45/EUbut even extended to paper invoices. Accordingly, current Art. 233 of the VAT Di-rective states: “The authenticity of the origin, the integrity of the content and thelegibility of an invoice, whether on paper or in electronic form, shall be ensuredfrom the point in time of issue until the end of the period for storage of the invoice”.

As for the deadline for issuing invoices, currently, the time limits for issuing in-voices vary a lot throughout Member States25, leading sometimes to a very heavyadministrative burden on multinational enterprises which operate in differentMember States. In response to suggestions from businesses, the EU Commissionhad proposed to introduce a uniform time limit expiring on the 15th day of themonth following the one in which the taxable event occurs26. However, the EUCommission proposal was rejected and the above-mentioned time limit was onlyextended to cross-border services subject to the reverse charge mechanism27.

23 The new rules adopted by Directive 2010/45/EU had to be adopted by Member States not later than1 January 2013.

24 Wouter Brackx/Ine Lejeune, ‘Equal treatment of paper and electronic invoices in the European Un-ion – Finally!’, International VAT monitor (2010), p. 260 (p. 261).

25 Gorka Echevarria Zubeldia, ‘The second EU invoicing Directive: a missed opportunity’, Interna-tional VAT monitor (2010), p. 417 (p. 418).

26 That time frame was the deadline at the time imposed on intra-community supply of goods accord-ing to the then in force Art. 67 of the VAT Directive.

27 See Art. 222 of the VAT Directive as amended by Directive 2010/45/EU.


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The storage of invoices is governed by Art. 247(1) of the VAT Directive, whichstates: “Each Member State shall determine the period throughout which taxablepersons must ensure the storage of invoices relating to the supply of goods or ser-vices in its territory and invoices received by taxable persons established in its ter-ritory”. Accordingly, this provision has the effect that businesses involved in thesupply of cross-border services, which are generally deemed to be supplied in thestate of the customer, must store the related invoices for the storage period appli-cable in the country of the customer. The EU Commission had proposed to har-monize the storage period under all circumstances to six years. Nonetheless, Art.247(1) remained unchanged after the adoption of Directive 2010/45/EU.

D. Measures to tackle fraud schemesIn tax matters, and even more so in a harmonized tax as VAT, tax fraud can usu-ally be prevented, or at least fought, through improving existing laws or enhanc-ing administrative cooperation. In the past few years, the institutions inside Euro-pean Union have shown they coherently stick to this pattern.

As related to administrative cooperation, on 7 October 2003 the EU Counciladopted a Regulation28 on administrative cooperation regarding VAT that waslater recast in another Regulation29. Both of the Regulations had the aim of im-proving the legal framework governing administrative cooperation in the VATfield and acting as a tool in the fight against VAT fraud.

The core of both Regulations was the methods of exchanging information be-tween Member States’ tax authorities. Regarding this point, the Regulations pro-vide the following:

exchanges on request. Any information that may assist the VAT authorities tomake a correct VAT assessment may be exchanged on request. Under this ar-rangement, the VAT authorities may also agree that officials of other EUMember States are present during administrative enquiries in their own EUMember States, although foreign officials may not exercise a power of inspec-tion outside their own jurisdiction. Through local officials, the officials of oth-ers EU Member States may access the same premises and documents as localofficials. Two or more EU Member States may also undertake simultaneouscontrols in their territories;

spontaneous exchanges. By automatic or structured exchange, the VAT au-thorities may forward information that may assist the authorities of other EUMember States in making a correct VAT assessment if the place of supply is in

28 Council Regulation 1798/2003 of 7 October 2003 on administrative cooperation in the field of valueadded tax and repealing Regulation 218/92, O.J. L. 264, 15.10.2003, pp. 1-11.

29 Council Regulation 904/2010 of 7 October 2010 on administrative cooperation and combating fraudin the field of value added tax, O.J. L. 268, 12.10.2010, pp. 1-18.




the latter EU Member State, if a breach of VAT legislation has been or may becommitted, or if there is the risk of a tax loss in another EU Member State;

exchanges regarding intra-community transactions. EU Member States mustmaintain a complete and accurate electronic database of details relating to theintra-community trades in goods and services (the database is known amongoperators as “intrastat”30).

Focusing more specifically on Regulation 904/2010, it introduced some impor-tant arrangements relating to:

the quality of the information provided in the databases, which has beenslightly improved;

the setting-up of the “Eurofisc” network providing for multilateral, swift andtargeted exchange of information relating to VAT fraud;

the introduction of a feedback mechanism; automated access to databases of other Member States.

With respect to modifications and enhancements of existing Regulations, two ofthe most important measures were adopted on 22 July 2013. On that day, indeed,the EU Council approved two Directives31 that should enable Member States tobetter combat VAT fraud, facilitating rapid reaction and allowing specific meas-ures to tackle the notorious “carrousel frauds”.

Until those two Directives, fraud schemes in VAT field had been tackled either byamendments or through derogations from the VAT Directive.

In brief, the Directives adopted on 22 July 2013 provide relief on this issue byamending the VAT Directive:

Directive 2013/42/EU is aimed at enabling immediate measures to be taken incases of sudden and massive VAT fraud (“quick reaction mechanism”). Spe-cifically, an accelerated procedure will enable Member States to apply a “re-verse charge” mechanism to specific supplies of goods and services for a shortperiod of time, by derogation from the provisions of the VAT Directive;

Directive 2013/43/EU allows Member States to apply, on an optional and tem-porary basis, a reversal of liability for the payment of VAT (“reverse charge

30 Though a uniform and all-at-once accessible platform does not exist across the EU, the common fea-tures of the communications that operators must periodically submit to the Intrastat system are pro-vided by Council Regulation 638/2004 of 31 March 2004 on Community statistics relating to thetrading of goods between Member States and repealing Council Regulation 3330/91, O.J. L. 102,07.04.2004, pp. 1-8.

31 Council Directive 2013/42/EU of 22 July 2013 amending Directive 2006/112/EC on the common sys-tem of value added tax, as regards a Quick Reaction Mechanism against VAT fraud, O.J. L. 201,26.07.2013, Council Directive 2013/43/EU of 22 July 2013 amending Directive 2006/112/EC on thecommon system of value added tax, as regards an optional and temporary application of the reversecharge mechanism in relation to supplies of certain goods and services susceptible to fraud, O.J. L.201, 26.07.2013.


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mechanism”), with the aim of closing off certain types of known fraud, in par-ticular carousel schemes. The “reverse charge” mechanism will now poten-tially apply to the following sectors: mobile phones, integrated circuit devices,supplies of gas and electricity, telecoms services, game consoles, tablet PCsand laptops, cereals and industrial crops and raw and semi-finished metals.

E. The proposal for a standard VAT returnIn early 2007, the EU Commission launched a very broad action program32 thathad the ultimate goal to reduce administrative burdens on businesses.

In fact, part of the existing burden is caused by the lack of a common Europeanset of rules regarding VAT returns. Therefore, after launching the recalled actionprogram, the EU Commission appointed one of the world’s most important advi-sory firms to perform a study on the feasibility of a common VAT return33. On 27February 2013 the results of the study were presented to the EU Commission: oneof the most important aspects of the study is the one related to the calculation ofthe impact of the introduction of a common VAT return on the compliance costsof businesses as compared to the contemporary compliance costs34. On 23 Octo-ber 2013, the EU Commission published a proposal for a Council Directive,broadly in line to the study and its proposals, introducing a common VAT re-turn35.

As for the technicalities of the proposal for a common VAT return, the followingare the most relevant features which the EU Commission suggested:

the new arts. 250 and 251 of the VAT Directive set out all the information thatthe taxpayers would have to provide in the common VAT return. Nonethe-less, according to the new Art. 251, Member States will have the possibility torequest a lot of additional information;

the new Art. 252 of the VAT Directive would deal with the deadlines of thecommon VAT return. The standard would be the one of monthly VAT re-turns to be submitted in a period included between a month and two monthsafter the end of the month of the return. For small taxpayers36, however, it is

32 European Commission, Action Programme for reducing administrative burdens in the EuropeanUnion, COM(2007)23, 24 January 2007.

33 Price Waterhouse Coopers, Study on the feasibility and impact of a common EU standard VAT re-turn, Specific Contract no. 9, TAXUD/2011/DE/329, 27 February 2013.

34 In the best-case scenario the introduction of the common VAT return could lead to total costs sav-ings for business of EUR 20.6 billion (0,16% of EU GDP in 2011), Price Waterhouse Coopers, Studyon the feasibility and impact of a common EU standard VAT return, Specific Contract no. 9,TAXUD/2011/DE/329, 27 February 2013, p. 92.

35 European Commission, Proposal for a Council Directive amending Directive 2006/112/EC on thecommon system of value added tax as regards a standard VAT return, COM(2013)721, 23 October2013.

36 Whose turnover is less than EUR 2 million.




provided that Member States could allow a taxable period of three calendarmonths;

the new Art. 252a of the VAT Directive would require Member States to ac-cept and encourage e-filing for common VAT returns, thus including the pos-sibility to use electronic file transfer. Moreover, according to the new Art.252a, “standard VAT returns submitted by electronic means shall be acceptedby Member States when the authenticity of origin and the integrity of theircontent are ensured by an advanced electronic signature[…]or by other meth-ods offering a similar level of security”37.

F. Taxation of Telecommunication, Broadcasting and Electronic Services

In a very complex and “immaterial” business as the one related to telecommuni-cation, broadcasting and electronic services38, VAT regimes have always provedto be, as will be shown, equally complex. In an effort to simplify and modernizethose regimes, some new rules have recently been implemented and will be ana-lyzed in this section.

The very complex rules that were repealed starting from 1 January 2015 are as fol-lows:

telecommunication services: at the beginning of 1997, the Council author-ized39 the Member States to shift telecommunications services to Art. 9(2)(e)of Directive 77/388/EEC40. In consequence of the Council Decision, telecom-munications services:– supplied to all customers resident outside the European Union were out-

side the scope of VAT;– supplied to taxable persons established inside the European Union were

subject to VAT in the customer’s Member State41;– supplied to non-taxable persons resident within the European Union were

deemed to be supplied at the place where the service provider was estab-lished42, even though Member State were authorized, whereas the provider

37 European Commission, COM(2013)721, p. 14.38 Hereinafter TBE services.39 Council Decisions 97/200 to 97/214 of 17 March 1997, O.J. L.86 of 28 March 1997, pp. 5-34.40 Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member

States relating to turnover taxes – Common system of value added tax: uniform basis of assessment,O.J. L. 145, 13.06.1977, according to which whereas the customer was a taxable person or was estab-lished outside the European Union, the services were deemed to be supplied at the place where thecustomer was established.

41 In the hands of the customer with utilization of the reverse charge mechanism.42 Even though Member State were authorized, whereas the provider was established outside the Euro-

pean Union, to apply the “effective-use-and-enjoyment” criterion, provided by Art. 9(3)(b) of Direc-tive 77/388/EEC.


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was established outside the European Union, to apply the “effective-use-and-enjoyment” criterion43;

broadcasting and electronic services: on 1 July 2003, special temporary provi-sions came into effect as regards to cross-border broadcasting and electronicservices44. Basically, broadcasting and electronic services followed the rulesthat applied to telecommunication services, with the exception of electronicservices supplied by providers established outside the European Union tonon-taxable persons established within the European Union. The latter ser-vices, as a general rule45, were deemed to be supplied in the Member Statewhere the customer was resident. Nonetheless, as a means of attracting for-eign suppliers of electronic services within the borders of the European Un-ion, Art. 26(c) of Directive 77/388/EEC contained a special scheme (“one-stop-shop scheme”) according to which the services providers had the possi-bility to register for VAT purposes in a web portal in a single Member Stateand electronically account for and pay VAT there in respect of all electronicservices supplied throughout the European Union to non-taxable persons. In-itially applied for a period of three years, the special scheme was extended to31 December 2014.

With the aim to harmonize, whenever possible, the taxation of services at theplace where they were actually exploited, Council Directive 2008/8/EC, whichamended the VAT Directive as regards to the place of supply of services, was im-plemented as part of the “VAT package”. Art. 58 of the VAT Directive, in fact, asrepealed by Art. 5 of Directive 2008/8/EC, states that as of 1 January 2015 all tele-communication, broadcasting and electronic services, provided to a non-taxableperson, are taxable at the place where the consumer is established. Further provi-sions under Art. 5 of Directive 2008/8/EC require, in order to facilitate VAT com-pliance by businesses, a special scheme to be set up to enable businesses to have asingle point of electronic contact for VAT identification, declaration and pay-ment purposes; this scheme requires the use of an electronic interface, referred toas “mini one-stop-shop scheme”.

The main effect of the new rules is that, regardless of whether the service provid-ers are established within or outside the European Union, TBE services renderedto non-taxable customers are, under all circumstances, deemed to be supplied atthe place where the customer is established.

43 Provided by Art. 59(a)(b) of the VAT Directive, according to which Member States can be authorizedto tax a supply whereas it is exploited. The customers being non-taxable persons, the suppliers, underthis provision, had to register to the Member State VAT system in order to account for the VAT.

44 Council Directive 2002/38/EC of 7 May 2002 amending temporarily Directive 77/388/EEC as re-gards the value added tax arrangements applicable to radio and television broadcasting services andcertain electronically supplied services, O.J. L.128 of 15 May 2002, pp. 41-44.

45 Art. 9(2)(f) of Directive 77/388/EEC.




Some of the most remarkable features of the new scheme that have not alreadybeen dealt with previously are the following:

status of the customer: according to the new rules, providers of TBE serviceshave to establish the VAT status of their customers solely on the basis ofwhether or not the latter have given their VAT identification number. In ab-sence of a valid VAT identification number, the supplier has to treat the cus-tomer as a non-taxable person for the purposes of the new TBE services re-gime. It is of great importance to the supplier, then, to utilize the VIES;

location of the customer: once determined that the customer is a non-taxableperson, the biggest challenge for TBE services providers is to determine whatthe Member State of residence of the customer is. In order to find a legal solu-tion to the foreseeable issues, the new rules provide a series of rebuttable pre-sumptions46. Nonetheless, the provider can rebut the presumptions on the ba-sis of the “items of non-contradictory evidence”47.

non-compulsory scheme: it is important to point out, finally, that the “minione-stop-shop scheme” though being highly recommended by the EU Com-mission, is optional in the sense that businesses can also opt for VAT registra-tion in every EU Member State in which they have non-taxable customers. Itgoes without saying that the volume of the operations and the diversificationof the customers will be the two most important drivers in businesses’ deci-sions processes to adopt the new scheme.

III. OECD international VAT/GST guidelinesA. Events leading up to the implementation of the VAT/GST

guidelinesIn the past 15 to 20 years, with the emergence of the globalized economy, the flowof goods and services has experienced an unprecedented growth. Electronic com-merce has enabled consumers and small enterprises to operate beyond nationalboundaries. The distance between producers and consumers has steadily shrunk.It is natural, then, that differences in treatment of cross-border supplies of ser-vices and intangibles have become apparent and costly. Moreover, the resulting

46 For example: in the supply of TBE services provided through a wi-fi hotspot, the customer is deemedto be resident at the place where the hot-spot is located; in the supply of TBE services on a ship, air-craft or train, the customer is deemed to be resident where the transport has begun; in the supply ofTBE services through a mobile network, the customer is presumed to be resident in the MemberState of the country code of the SIM card utilized.

47 According to Art. 24(d)(1) of the VAT implementing Regulation, Council implementing Regulation1042/2013 of 7 October 2013 amending Implementing Regulation 282/2011 as regards the place ofsupply of services, O.J. L. 284, 26.10.2013, pp. 1-9, the supplier has the possibility to rebut the pre-sumptions according to the customer’s billing or IP address, the location of the bank account, or anyother relevant commercial information.


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need to tackle the differences in order to avoid double taxation and double non-taxation became apparent from both the national governments’ and the taxpay-ers’ standpoint.

With the aim of mitigating double-(non)-taxation, the OECD’s work on VATstarted with the OECD Ottawa Conference on electronic commerce in 199848. Atthe Ottawa Conference the main question was how to implement tax policies andprocedures without distorting the new and traditional economies. Many ap-proaches were discussed and the one that prevailed was probably the most logicalone. The OECD’s view emerging after the Ottawa Conference was that electroniccommerce’s taxation should in principle be the same as traditional commerce.

As a result, the Governments agreed on the Ottawa Taxation Framework Condi-tions49, which, among many other things, provided the following guidelines as toconsumption taxes:

rules for the consumption taxation of cross-border trades should result in tax-ation in the jurisdiction where consumption takes place and an internationalconsensus should be sought on the circumstances under which supplies areheld to be consumed in a jurisdiction;

for the purposes of consumption taxes, the supply of digitized productsshould not be treated as a supply of goods;

where business and other organizations within a country acquire services andintangible property from suppliers outside the country, countries should ex-amine the use of reverse-charge, self-assessment or other equivalent mecha-nisms which would give immediate protection of their revenue base and of thecompetitiveness of domestic suppliers.

As a natural continuation of the 1998 Ottawa conference, the OECD Committeeon Fiscal Affairs adopted in 2001 the “guidelines on consumption taxation ofcross-border services and intangible property in the context of e-commerce”50.The main provisions of the guidelines were the following:

for B2B transactions, the place of consumption is deemed to be in the jurisdic-tion where the recipient has established its business presence;

for B2C transactions, the place of consumption is deemed to be in the jurisdic-tion where the recipient has his usual place of residence.

At any rate, notwithstanding all the work OECD undertook since 1998, it had be-come increasingly clear that many problems still surrounded the application of

48 A borderless world: realising the potential of electronic commerce, Ottawa, 7-9 October 1998.49 Electronic commerce: taxation framework conditions, A report by the Committee on fiscal affairs, as

presented to Ministers at the OECD Ministerial conference “A borderless world: realising the poten-tial of electronic commerce”, Ottawa, 7-9 October 1998.

50 OECD, Guidelines on Consumption Taxation of Cross-Border Services and Intangible Property inthe Context of E-Commerce, 2001.




VAT in cross-border situations. Both the 2004 and 2005 OECD’s “Report on theapplication of consumption taxes”51 showed that differences remained among lo-cal jurisdictions mainly in the treatment of services and intangibles. It was alsostated that those had the potential to obstruct business activity, hinder economicgrowth and distort competition52.

As a result, in 2006 OECD started working on a set of specific guidelines on VATin cross-border transactions53 and in 2011 on a set of guidelines on VAT neutral-ity54.

A further effort to harmonize the guidelines was undertaken in February 2013,when the OECD published a draft consolidated version of the International VAT/GST guidelines, merging both the cross-border and the neutrality guidelines55.

B. Legal force of the VAT/GST guidelines and their core features

Preliminarily, it is important to describe the legal framework of the VAT/GSTguidelines. They are in fact drafted as recommendations. Therefore, they do notimpose legally binding VAT/GST rules on countries or prescribe legislative ap-proaches. They are intended to serve as a basis/guidance for countries to frametheir own national laws. Moreover, the VAT/GST guidelines have been developedin stages, and the output from each stage is a building block contributing to thecomplete guidelines. They have not been completed yet: OECD is still working ona broader project56.

Moreover, the VAT/GST guidelines are built on two core principles that wereadopted by the OECD’s Committee on Fiscal Affairs in 2006, when the work onthe first set of guidelines began57:

51 OECD, Report on the Application of Consumption Taxes to the Trade in International Services andIntangibles, 2004; OECD, Report on the Application of Consumption Taxes to the Trade in Interna-tional Services and Intangibles – Progress Report and Draft Principles, 2005.

52 OECD, Report on the Application of Consumption Taxes to the Trade in International Services andIntangibles, 2004, p.4.

53 OECD, Committee on Fiscal Affairs – Working Party n. 9 on Consumption Taxes, InternationalVAT/GST guidelines, 2006.

54 OECD, Committee on Fiscal Affairs – Working Party n. 9 on Consumption Taxes, InternationalVAT/GST guidelines – Guidelines on Neutrality, 2011.

55 OECD, Committee on Fiscal Affairs – Working Party n. 9 on Consumption Taxes, InternationalVAT/GST guidelines – Draft Consolidated Version, 2013. Evidently, any successive reference to the“guidelines”, if not otherwise stated, refers to the draft consolidated version of 2013.

56 The Committee on Fiscal Affairs still intends to develop Guidelines on the place of taxation for cross-border supplies of services and intangibles to final consumers (B2C) as well as anti-abuse provisionsand provisions on mutual cooperation and dispute resolution.

57 OECD, International VAT/GST guidelines, 2006, pp. 8-9.


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the neutrality principle, whereby VAT is a tax on final consumption thatshould be neutral for business;

the destination principle, whereby internationally traded services and intangi-bles should be subject to VAT in the jurisdiction of consumption.

More specifically focused on the technicalities of the guidelines, the first parthighlights the most important features of an “ideal” value added tax58 with a spe-cific focus on international trade. The most important features can be summa-rized as follows:

a VAT is a broad-based tax on final consumption: this is the overarching pur-pose of a VAT and the necessary corollary to that is that the burden of VATshould not rest on businesses;

a VAT is designed with a staged collection process: this, in turn, requires amechanism for relieving businesses from the burden of the VAT they paywhen they acquire goods, services or intangibles;

the principle for cross-border transactions should be the destination one: it isthe one that guarantees neutrality in international trade, since with the originprinciple the revenue from VAT would not necessarily accrue where finalconsumption takes place and it could cause an harmful VAT/GST rate com-petition among jurisdictions;

the implementation of the destination principle for goods is straightforwarddue to the presence of border controls: the goods are taxed when they are de-livered, the exported goods are free of VAT and imports are subject to thesame VAT as equivalent domestic goods in the purchaser’s jurisdiction;

the implementation of the destination principle for services and intangiblesshould be guaranteed by the reverse charge mechanism.

C. Neutrality, services and intangibles: features of the guidelines

According to the guidelines59, the definition of neutrality in VAT “has a numberof dimensions, including the absence of discrimination in a tax environment thatis unbiased and impartial and the elimination of undue tax burdens and dispro-portionate or inappropriate compliance costs for businesses”.

The guidelines developed by the OECD with regards to neutrality have the aim togive governments a basis and some technical suggestions in order to preserveneutrality in cross-border trades. The latter goal is achieved by the destinationprinciple, so that supplies are taxed where they are used by the business customerin order to make onward supplies. The implementation of a reverse-charge mech-

58 Apparently, “ideal” in the eyes of the OECD.59 OECD, International VAT/GST guidelines, p. 15.




anism (or a similar one) should ensure that the customer itself accounts for theVAT/GST, this way preventing the supplier from registering in the country ofdestination.

This structure, however, does not ensure that complete neutrality is alwaysachieved: there might be circumstances in which local territoriality rules “entailsthat business are taxed […] in a country which is not the country of destinationand where they may not have a business establishment”60. Therefore, there maybe cases when taxpayers could incur a foreign VAT/GST. Countries have imple-mented mechanisms to allow foreign taxpayers to recover VAT/GST, “but this isnot always the case-especially in developing countries where budgetary con-straints are such that implementing a refund mechanism […] is not feasible”61.

The lack of consistency in the national legislations and their complexity, then,may represent a huge compliance and administrative burden for businesses andtax administrations. The OECD, in answering these issues, implemented a set ofguidelines of neutrality of VAT/GST.

According to Guideline 1 “The burden of value added taxes themselves shouldnot lie on taxable businesses except where explicitly provided for in legislation”.The sentence “except where explicitly provided” means that countries may legiti-mately place a value added tax burden on business: this is the case when, for ex-ample, transactions made by businesses are exempt because the tax base of theoutput is difficult to assess (i.e. many financial services) or for policy reasons (i.e.health care, education, culture)62. The tax burden in such cases is, obviously, rep-resented by the impossibility to deduct input VAT.

Guideline 2 states that “Businesses in similar situations carrying out similar trans-actions should be subject to similar levels of taxation”.

According to Guideline 3 “VAT rules should be framed in such a way that theyare not the primary influence on business decisions”. This guideline has two con-sequences: VAT should not be the main or one of the main drivers in business de-cisions and VAT rules should be accessible, clear and consistent.

Guideline 4 states that “With respect to the level of taxation, foreign businessesshould not be disadvantaged nor advantaged compared to domestic businesses inthe jurisdiction where the tax may be due or paid”.

Guideline 5 deals with the possible solutions in order to ensure that foreign busi-nesses do not incur irrecoverable VAT. Accordingly, it states that “To ensure for-eign businesses do not incur irrecoverable VAT, governments may choose from a

60 Alain Charlet/Stéphane Buydens, ‘The OECD International VAT/GST Guidelines: past and futuredevelopments’, World Journal of VAT/GST Law (2012), p. 175 (p. 182).

61 Alain Charlet/Stéphane Buydens, World Journal of VAT/GST Law (2012), p. 182.62 OECD, International VAT/GST guidelines, p. 15.


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number of approaches”. More specifically, according to the guidelines63, the ap-proaches that countries could adopt in order to ensure that foreign businesses dono incur irrecoverable VAT include:

the operation of a system of applying for direct refunds of local VAT incurred; making supplies free of VAT; enabling refunds through local VAT registration; shifting the responsibility on to locally registered suppliers/customers; granting purchase exemptions certificates.

Guidelines 6 is aimed at lightening the potential administrative burden by statingthat “Where specific administrative requirements for foreign businesses aredeemed necessary, they should not create a disproportionate or inappropriatecompliance burden for businesses”. The guidelines admits that dealing with for-eign businesses with no “legal” presence in a jurisdiction inevitably brings an ele-ment of risk but nonetheless, specific measures applicable to foreign businessesshould not result in a disguised form of discrimination64.

VAT neutrality in international trade is generally achieved by the use of the desti-nation principle. Implementing the destination principle with respect to servicesand intangibles is more difficult than with respect to international trade in goods,since customs controls are largely ineffective for confirming exportation of ser-vices and intangibles65.

For this reason, the guidelines for cross-border supplies of services and intangi-bles developed by the OECD reflect the destination principle while ensuringthat66:

international neutrality is maintained; compliance by businesses involved in these supplies is kept as simple as possible; clarity and certainty are provided for both businesses and tax administrations; the costs involved in compliance and administering the tax are minimal; barriers to fraud and other abuses are sufficiently robust.

In this context, considering that not all countries utilize the same proxy to applythe destination principle, so that opportunities for double-(non)-taxation arise,the work of the OECD on these guidelines is even more remarkable.

According to Guideline 1 “For consumption tax purposes internationally tradedservices and intangibles should be taxed according to the rules of the jurisdictionof consumption”. Guideline 1 clearly expresses the desire of the OECD to ensure

63 OECD, International VAT/GST guidelines, p. 17.64 OECD, International VAT/GST guidelines, p. 18.65 OECD, International VAT/GST guidelines, p. 28.66 OECD, International VAT/GST guidelines, p. 28.




tax neutrality according to the destination principle. Although the fundamentalpurpose of the destination principle is to ensure that all revenue accrues to the ju-risdiction where the supply to the final consumer occurs, according to the guide-lines the principle should not be limited to B2C supplies. Then, even though B2Bsupplies do not involve final consumption, the application of the destinationprinciple facilitates the ultimate goal of ensuring that the tax is paid and revenueaccrues to the jurisdiction where the supply to the final consumer takes place67.

The necessary corollary to Guideline 1 is Guideline 2, according to which “Forbusiness to business supplies, the jurisdiction in which the customer is locatedhas the taxing rights over internationally traded services or intangibles”.

Guideline 3, on the other hand, introduces the concept of identity of the customerand accordingly states that “The identity of the customer is normally determinedby references to the business agreement”. When supplies takes place between sep-arate legal entities with single locations only, the location of the customer shouldbe known once its identity is determined. Moreover, for the purposes of theOECD guidelines, the term “business agreement” has to be properly defined:“business agreements consist of the elements that identify the parties to a supplyand the rights and obligations with respect to that supply. They are generallybased on mutual understanding”68. Relevant elements of the business agreementhave many forms and include, for example, general correspondence, service levelagreements, purchase orders, invoices, payment instruments and receipts.

Understood that the first three guidelines represent the cornerstones of the guide-lines on the place of taxation for cross-border supplies for services and intangi-bles, Guideline 4, Guideline 5, Guideline 6 and Guideline 7 provide guidance forsome more practical issues, mainly related to the quest for the right proxies, use-ful to achieve the most efficient tax allocation among different jurisdictions.

According to Guideline 4, in fact, “When the customer has establishments inmore than one jurisdiction, the taxing rights accrue to the jurisdiction(s) wherethe establishment(s) using the service or intangible is (are) located”. Evidently,the term “use of a service or intangible” means the use of a service or an intangibleby a business for the purpose of its business operations.

According to Guideline 5 “In those cases where the services are used by one ormore establishments other than the establishment that entered into the businessagreement, the taxing rights are allocated in two steps. In the first step, taxingrights are allocated to the jurisdiction where the customer establishment that en-ters into the business agreement is located. In the second step, taxing rights are al-located to the jurisdiction where the customer establishment that uses the service

67 OECD, International VAT/GST guidelines, p. 29.68 OECD, International VAT/GST guidelines, p. 31.


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or intangible under a recharge arrangement is located”. According to the guide-lines69, in line with normal business practices, the establishment of use will becharged for the service or the intangible on the basis of internal recharge arrange-ments, in accordance with corporate tax, accounting or other regulatory require-ments. Moreover, in situations in which such recharge is not made, according tothe OECD, VAT will in principle be applied as if a recharge arrangement was inplace so as to ensure that taxing rights accrue to the jurisdiction of use.

Guideline 6 deals specifically with the concept of proxy and states that “The tax-ing rights over internationally traded services or intangibles supplied betweenbusinesses may be allocated by reference to a proxy other than customer locationas laid down in guideline 2, when both the following conditions are met:

The allocation of taxing rights by reference to customer location does not leadto an appropriate result when considered under the following criteria: neutral-ity, efficiency of compliance and administration, certainty and simplicity, ef-fectiveness, fairness.

“A proxy other than customer location would lead to a significantly better re-sult when considered under the same criteria”. Examples of other proxiescould be the supplier’s location, the place of performance, the location of im-movable property. In any case, according to the guidelines70, any such specificrule should be supported by clear criteria and should be limited to the greatestextent possible.

The last of the Guidelines on international supply of services and intangibles isGuideline 7, which states that “For internationally traded business-to-businesssupplies of services and intangibles directly connected with immovable property,the taxing rights may be allocated to the jurisdiction where the immovable prop-erty is located”. The most common supplies that could fall under this rule are71:

the transfer, sale, lease or the right to use, occupy, enjoy or exploit immovableproperty;

supplies of services that are physically carried out on immovable property it-self, such as constructing, altering and maintaining the immovable property;

other supplies of services and intangible that do not fall within the first twocategories but where there is a very close, clear and obvious link or associationwith the immovable property.

69 OECD, International VAT/GST guidelines, p. 32.70 OECD, International VAT/GST guidelines, p. 45.71 OECD, International VAT/GST guidelines, p. 48.




IV. Concluding remarksIn recent years the EU as well as the OECD plainly assumed the role of interna-tional standard setters in the VAT/GST field. Differences in their work, nonethe-less, do exist and involve both the legal framework in which they operate, the legalforce of their work and the objectives they pursue.

The OECD has operated in between its “moral suasion” power and the relativebinding force of its activities: the product of this dichotomy is the legal hybrid of-ten referred as “soft law”72. The role of the OECD in the VAT/GST field is thennaturally more “confined” to advising on policies on supra-national issues, itsguidelines not constituting binding rules not even for OECD members. The EU,instead, being a political institution in a very broad sense, has taken a slightly dif-ferent role than that of the OECD. The EU in fact has focused more on trying toreduce administrative burdens for taxpayers in daily activities, on enhancing ad-ministrative cooperation among Member States and on tackling tax evasion andtax avoidance. The EU, in other words, is interpreting its role in the VAT field asone of a political, every-day, rules-maker. Moreover, as far as the objectives pur-sued are concerned, the OECD has embraced a more “programmatic” role thanthe EU. The cornerstone of the OECD’s work, in fact, is represented by someguidelines which mainly deal with the fundamental points of the implementationof a VAT/GST. The EU, instead, relying on its wider legal force, is focused on im-proving the common system of an advanced VAT system, rather than focusingon the “philosophical” cornerstones of VAT. The EU’s activity is, in fact, directedto its Member States, which all have an advanced VAT system, whilst the OECDactivity is also aimed at giving developing countries which do not have a VAT/GST some instruments to implement one. Nonetheless, it is has to be highlightedthat it is probably easier for OECD Member countries to agree on OECD recom-mendations, since they represent a form of “soft law”, as described previously. Incontrast, for Member States of the EU implementing EU rules is a much morecomplex process, often involving, as in the case of council Directives, nationalparliaments.

The recent activity of both the OECD and the EU, at any rate, has to be praised: fi-nally, through the focus on VAT/GST neutrality and administrative efficiency,the taxpayer was put back at the center of attention. In fact, both the Green Paperon the Future of VAT issued by the EU and OECD guidelines aim at trying to re-duce administrative burdens and local legislative differences while vigorouslyfighting the ones that try to exploit the loopholes that remain in the different ju-risdictions. In the EU, many measures dating from the Green Paper have alreadybeen implemented and have reached their goals; others are going to be imple-

72 Klaus Vogel, ‘Introductory comments: the OECD, its Model Convention and its Commentaries’, op.post., unpublished.


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mented soon: the implementation of a full destination principle will reduceharmful competition among EU jurisdictions on the basis of VAT rates; the re-verse-charge mechanism for “sensitive” business sectors has become one of thebiggest means for tackling frauds; TBEs services finally have a clear and compre-hensive regime on which all the operators can rely; electronic invoicing featureshave been disclosed; the VAT standard return is on the cusp of being imple-mented, and so on. At the same time, the OECD was the first institution to stim-ulate an international debate on VAT treatment for e-commerce, and some of theprinciples underlying the EU mini-one-stop-shop scheme possibly derive fromthe OECD’s work. Moreover, the OECD’s constant work on refining the guide-lines regarding neutrality and taxation of cross-border transactions of servicesand intangibles has enhanced their role as a useful tool to improve/implement lo-cal GSTs/VATs73. Yet the legislative pace could have possibly been even faster74

and sometimes, above all the demanding, everyday activity of the EU, could havebeen sharper75. Still, the direction undertaken and the recent developments in thepolicies of the OECD and the EU are indisputably the right ones. In fact, both inthe OECD and in the EU policy decisions, the trends have been basically four: fa-cilitating taxpayers’ compliance by reducing administrative burdens, restructur-ing VATs/GSTs in a more neutral fashion, strengthening VAT/GST collectionmechanisms and fighting legislative loopholes.

Only time will tell whether the OECD and the EU will win their battle for a moreefficient and neutral VAT/GST.

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74 The legislative process in the EU has often been slowed by the qualified majority/unanimity requiredin the European Council while in the OECD Member countries, unanimity has often slowed the ex-pansion of new measures.

75 See section 2.3.




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